Community Financial Services Association of America, Ltd. v. Federal Deposit Insurance Corporation

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

}
COMMUNITY FINANCIAL SERVICES }
ASSOCATION OF AMERICA, LTD., }
et al., }
}
Plaintiffs, }
}
v. } Case No. 14-CV-953 (GK}
}
FEDERAL DEPOSIT INSURANCE }
CORPORATION, et al., }
}
Defendants. }
~~~~~~~~~~~~~~~~~
}

MEMORANDUM OPINION

Plaintiffs, Community Financial Services Association of

America, Ltd. ("CFSA") and Advance America, Cash Advance Centers,

Inc. ("Advance America"), allege that the Defendants, the Federal

Deposit Insurance Corporation ("the FDIC"), the Board of Governors

of the Federal Reserve System, and the Off ice of the Comptroller

of the Currency and Thomas J. Curry, in his official capacity as

the Comptroller of the Currency ("the OCC"), have violated the due

process rights of CFSA's members. Plaintiffs seek declaratory and

injunctive relief to prevent these alleged violations from

continuing.

This matter is before the Court on Defendants' Corrected

Motion to Dismiss for Lack of Associational or Organizational

Standing or, in the Alternative, for Judgment on the Pleadings

1
..

("Motion.to Dismiss"), in which Defendants seek dismissal of CFSA

as a party to this case. [Dkt . No. 7 5] . Upon consideration of

the Motion, Opposition, Reply, and the entire record herein, the

Motion to Dismiss is granted. 1

I. Background
A. Factual Background

The basic facts of this case were fully discussed in the

Court's prior Memorandum Opinion on Defendants' Motions to Dismiss

for Lack of Subject Matter Jurisdiction or, in the Alternative,

for Failure to State a Claim. CFSA v. FDIC, 132 F. Supp. 3d 98,

105-107 (D.D.C. 2015). Consequently, an abbreviated discussion of

the facts follows.

Plaintiffs are CFSA, an association of payday lenders, and

Advance America, a payday lender and member of CFSA. Id., 132 F.

Supp. 3d at 105. Defendants are agencies of the United States

Government that have been delegated regulatory authority over

various parts of the United States banking system. Id. at 106.

Plaintiffs allege that Defendants participated and continue

to participate in a campaign to force banks to terminate their

business relationships with payday lenders, known as. "Operation

Choke Point" and initiated by the United States Department of

Justice. Id. at 106-107. Defendants allegedly forced banks that

1 See Section I.B, Procedural Background, infra, for a detailed
history of the relevant briefs.
2
they supervise to terminate relationships with CFSA's members, "by

first promulgating regulatory guidance regarding reputation risk,'

and by later relying on the reputation risk guidance 'as the

fulcrum for a campaign of backroom regulatory pressure seeking to

coerce banks to terminate longstanding, mutually beneficial

relationships withall payday lenders.'" Id.

B. Procedural Background

On June 5, 2014, Plaintiffs filed their original Complaint,

[Dkt. No. l], which they amended on July 30, 2014, [Dkt. No. 12],

alleging that Defendants had violated the Administrative Procedure

Act ("APA") and CFSA's members' right to procedural due process

under the Fifth Amendment to the United States Cons ti tut ion. CFSA,

132 F. Supp. 3d at 107. Defendants then filed Motions to Dismiss

for Lack of Subject Matter Jurisdiction or, in the Alternative,

for Failure to State a Claim, [Dkt. Nos. 16, 17, & 18]. Id.

On September 25, 2015, the Court issued a Memorandum Opinion

("Memorandum Opinion" ) , granting in part and denying in part

Defendants' Motions. CFSA, 132 F. Supp. 3d 98. The Court held

that Plaintiffs had failed to state a claim under the APA, and

dismissed all claims brought pursuant to it. However, Plaintiffs

could continue litigating their due process claims, see id'., under

the theory that the stigma caused by Operation Choke Point deprived

them of a protected intere~t in liberty or property. Id. at 123-

3
24 (citing Paul v. Davis, 424 US 693, 708 (1976) & Gen. Elec. Co.

v. Jackson, 610 F.3d 110, 121 (D.C. Cir. 2010)).

Plaintiffs then filed a Second Amended Complaint ("SAC") ,

alleging facts and claims essentially indistinguishable from those

contained in their earlier complaints. 2 [Dkt. No. 64] . Each

Defendant filed an Answer to the Second Amended Complaint. [Dkt.

Nos. 65, 66, & 67].

On October 29, 2015, Defendants filed a Motion to Dismiss

Plaintiff CFSA for Lack of Associational and Organizational

Standing or, in the Alternative, a Motion for Judgment on the

Pleadings, [Dkt. No. 73], which they corrected on November 6, 2015.

[Dkt. No. 75]. Defendants seek dismissal only of Plaintiff CFSA

for lack of standing, and do not challenge the standing or seek

dismissal of Plaintiff Advance America. Plaintiffs filed an

Opposition on November 12, 2015, [Dkt. No. 76] and Defendants filed

their Reply on November 19, 2015. [Dkt. No. 77].

2 Despite the Court's dismissal of Plaintiffs' APA claims,
Plaintiffs again included them in their Second Amended
Complaint. See SAC , , 116-197 (Counts I-III, V-VII, IX-XI all
brought pursuant to the APA). As those claims were dismissed,
they are no longer before the Court and are not the subject of
this motion. Only Plaintiffs' due process claims, claims IV,
VIII, and XII, are properly before the Court.
4
 II. Standard of Review
A. Motion to Dismiss Under Fed. R. Civ. P. 12(b) (1)

As courts of limited jurisdiction, federal courts possess

only those powers specifically granted to them by Congress or

directly by the United States Constitution. Kokkonen v. Guardian

Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The plaintiff bears

the burden of establishing by a preponderance of the evidence that

the Court has subject matter jurisdiction to hear the case. See

Shuler v. United States, 531 F.3d 930, 932 (D.C. Cir. 2008). In

deciding whether to grant a motion to dismiss for lack of

jurisdiction under Rule 12 (b) (1), the court must "accept all of

the factual allegations in [the] complaint as true." Jerome Stevens

Pharmaceuticals, Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253

54 (D.C. Cir. 2005) (quoting United States v. Gaubert, 499 U.S.

315, 327 (1991)).

Nonetheless, "[t]he plaintiff's factual allegations in the

complaint will bear closer scrutiny in resolving a 12(b) (1) motion

than in resolving a 12(b) (6) motion for failure to state a claim."

Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp.

2d 9, 13-14 (D.D.C. 2001). The Court may also consider matters

outside the pleadings, and may rest its decision on its own

resolution of disputed facts. See Herbert v. Nat'l Acad. of Sci.,

974 F.2d 192, 197 (D.C. Cir. 1992).

5
 B. Motion for Judgment on the Pleadings Under Fed. R. Civ.
P. 12 {c)

"After the pleadings are closed but within such time as not

to delay the trial, any party may move for judgment on the

pleadings." Fed. R. Civ. P. 12(c). "Under Rule 12(c), the court

must accept the nonmovant' s a'llegations as true and should view

the facts in the light most favorable to the nonmovant." Bowman

v. District of Columbia, 562 F. Supp. 2d 30, 32 (D.D.C. 2008)

(internal citations and quotation marks omitted). As with a motion

to dismiss for lack of subject-matter jurisdiction, "the court may

consider the motion based on the complaint standing alone or, where

necessary, on the complaint supplemented by undisputed facts

evidenced in the record, or the complaint supplemented by

undisputed facts plus the court's resolution of disputed facts."

Id. at 32-33 (internal citations and quotation marks omitted) .

"The court should grant a motion for judgment on the pleadings

if the movant is entitled to judgment as a matter of law." Id. at

32.

III. Analysis

Defendants challenge the standing of Plaintiff CFSA, arguing

that it no longer has Article III standing following this Court's

dismissal of the Plaintiffs' APA claims. Mot. to Dismiss at 1.

Defendants argue that CFSA cannot establish that it has standing

to pursue any of the due process claims that remain. Mot. to

6
Dismiss at 1-2. Specifically, Defendants contend that CFSA lacks

associational standing, organizational standing, or third party

standing.3 Id.

CFSA counters that it satisfies the requirements for all three

types of standing. Furthermore, CFSA argues that Defendants waived

these arguments by failing to raise them in their original Motions

to Dismiss for Lack of Subject Matter Jurisdiction or, in the

Alternative, for Failure to State a Claim.

A. CFSA Lacks Standing
i. CFSA Must Establish that It Has Article III
Standing

Article III of the Constitution limits the jurisdiction of

federal courts to certain "Cases" and "Controversies." See U.S.

Const. art. III, § 2. "[N]o principle is more fundamental to the

judiciary' s proper role in our system of government than the

constitutional limitation of federal-court jurisdiction to actual

cases or controversies." Clapper v. Amnesty Int'l USA, 133 S.Ct.

1138, 1146, (2013) (internal citations omitted). "One element of

the case-or-controversy requirement is that plaintiffs must

3 In ruling on Defendants' first Motion to Dismiss, this Court
held that the Plaintiffs collectively had standing to raise
these due process claims. CFSA, 132 F. Supp. 3d at 108-115.
However, in doing so, the Court did not expressly distinguish
between CFSA's and Advance America's respective standing to
raise these claims, nor did the parties themselves raise the
issue. See id. and [Dkt. Nos. 16, 17, 18, 23, 41, 44 & 46].
7
 establish that they have standing to sue." Id. (internal quotation

marks and citation omitted) .

"[T] he irreducible constitutional minimum of standing

contains three elements. First, the plaintiff must have suffered

an injury in fact . . which is (a) concrete and particularized,

and (b) actual or imminent, not conjectural or hypothetical.

Second, there must be a causal connection between the injury and

the conduct complained of Third, it must be likely, as

I opposed to merely speculative, that the injury will be redressed
I

by a favorable decision." Lujan v. Defenders of Wildlife, 504 U.S.

555, 560-61, ( 1992) (internal quotation marks, citations, and

footnotes omitted) .

ii. CFSA Lacks Associational Standing
Under the theory of associational standing, an organization

may sue as a representative of its members even if it lacks

standing to sue in its own right. See Hunt v. Washington State

Apple Advertising Commission, 432 U.S. 333, 343 ( 1977) . Three

elements are required to establish associational standing: 1) at

least one of the organization's members has standing to sue in her

own right; 2) the interests the organization seeks to protect in

its lawsuit are germane to the organization's purpose; and 3)

"neither the claim asserted nor the relief requested requires the

8
participation of individual members in the lawsuit." Id., at 343;

Air Transp. Ass'n v. Reno, 80 F.3d 477, 483 (D.C. Cir. 1996).

The Court has already ruled that CFSA's members have standing

to pursue the due process claims remaining in this lawsuit. CFSA,

132 F. Supp. 3d at 108-15. Furthermore, it is self-evident that

the interest CFSA seeks to protect- -the continued viability of

payday lending--is germane to its organizational purpose, advocacy

on behalf of payday lenders. Thus, to establish associational

standing under Hunt, CFSA need only show that participation of its

members in this lawsuit is not required. As discussed below, it

fails to do so.

a. CFSA' s claims that its members' due process
rights have been violated cannot be litigated
without the participation of its members

To satisfy the third prong of Hunt CFSA must show that

"neither the claim asserted nor the relief requested requires the

participation of individual members in the lawsuit." 432 U.S. at

343. Accordingly, Plaintiffs' claims are the starting point for

determining whether member participation is required.

Plaintiffs allege that Operation Choke Point violates the due

process rights of CFSA's members. See SAC~~ 141-47, 173-79, 198-

204 (Claims IV, VIII, XII). These due process claims are brought

under the so-called "stigma-plus rule." General Elec. Co. v.

Jackson, 610 F.3d at 121 (citing Paul v. Davis, 424 U.S. at 708).

9
Under the stigma-plus rule a due process violation exists where

the plaintiff can show, "in addition to reputational harm, that

(1) the government has deprived them of some benefit to which they

have a legal right . . or (2) the government-imposed stigma is

so severe that it 'broadly precludes' plaintiffs from pursuing 'a

chosen trade or business."' Id. (quoting Paul v. Davis, 424 U.S.

at708).

In its Memorandum Opinion the Court held that Plaintiffs could

succeed under the first prong of the stigma-plus test by showing

that Operation Choke Point deprived CFSA's members of a right to

hold a bank account. CFSA, 132 F. Supp. 3d at 123-24 (citing

National Council of Resistance of Iran v. Department of State, 251

F.3d 192, 204 (D.C. Cir. 2001); Wisconsin v. Constantineau, 400

U.S. 433, 437 (1971)). Alternatively, the Court held that

Plaintiffs could succeed under the second-prong by showing that

"the continued loss of banking relationships," caused by Operation

Choke Point, "may preclude them from pursuing their chosen line of

business." Id.

It is quite evident that significant participation by CFSA's

members is required under either theory. Central to both of CFSA's

theories of the case is that its members have lost banking

relationships as a result of Operation Choke Point. Thus, to prove

its claims CFSA must provide evidence that: 1) Operation Choke

10
 Point stigmatized CFSA' s members; 2) that CFSA' s members lost

banking relationships; and 3) that the loss of those banking

relationships was caused by the stigma generated by Operation Choke

Point.

Even if it is possible that Plaintiffs could show that

Operation Choke Point had stigmatiz.ed CFSA' s members without

significant member participation, 4 that alone would be insufficient

to prove their claims. See General Electric, 610 F. 3d at 121

("stigma alone is insufficient to invoke due process

protections").

Instead, to show that they had actually lost banking

relationships and those losses were caused by Operation Choke Point

would require significant and extensive participation by CFSA's

members. First, member-specific evidence is necessary to show

that CFSA' s members have, in fact, lost banking relationships.

For example, members would have to present individualized

"documentation regarding the allegedly lost accounts, including

the deposit agreements." Mot. to Dismiss at 16.

Second, in order to establish that it was the stigma generated

by Operation Choke Point that caused those losses, rather than

4
For example, Plaintiffs could attempt to show· that Operation
Choke Point had stigmatized the entire payday lending industry
relying primarily on evidence of the words and actions of
Defendants.
11
some other cause, individual banks would almost certainly be

required to provide evidence regarding their reasons for

terminating banking relationships with CFSA's members. This might

include communications between the banks and CFSA's members, see

id., along with the evidence of the banks' own reasoning, such as

internal memoranda or emails. Both require CFSA' s members to

introduce individualized evidence of their lost banking

relationships.

Furthermore, establishing that CFSA's members can no longer

pursue their chosen line of business will also almost certainly

require individualized evidence of their respective business

activity before and after Operation Choke Point, along with

evidence as to the myriad factors relevant to the success or

failure of their business. 5 Mot. to Dismiss at 7.

It is impossible to see how any of this could be accomplished

without significant member participation. See Friends for

American Free Enterprise Ass'n v. Wal-Mart Stores, Inc., 284 F.3d

575, 577 (5th Cir. 2002) (association's claims regarding

defendants' interference in bilateral relationships between

5 Defendants also point out that testing Plaintiffs' claims may
require "documentation of each member's finances over the past
several years . . interrogatories about any other lost
relationships or business opportunities that could have affected
[members'] financial prospects, and notice depositions to adduce
each member's present ability to do business." Mot. to Dismiss
at 15-16.
12
association members and third parties not involved in the lawsuit

are too fact-specific to be resolved without individual member

participation) .6

b. CFSA's request for injunctive, rather than
monetary, relief is insufficient to establish
that member participation is not required

In spite of this, Plaintiffs argue that because they seek

injunctive relief, rather than monetary damages, member

participation is not required. Opp'n at 11-12. For this

proposition Plaintiffs cite United Food and Commercial Works Union

Local 751 v. Brown Group, Inc., in which the Court noted that in

6 Indeed, the facts of Friends for American Free Enterprise seem
directly on point. In that case an association of "manufacturers'
representatives" sued Sam's Club for tortious interference. The
manufacturers' representatives were quintessential middlemen,
selling the goods produced by the manufacturers to third parties,
such as Sam's Club. The representatives' contracts with the
manufacturers had exclusivity clauses that prevented the
manufacturers from selling their products directly to others.
Sam's Club decided it would no longer purchase goods from the
representatives, but would instead purchase them directly from the
manufacturers. An association of manufacturers' representatives
then sued on their behalf, in part to keep the members' identities
secret. 284 F.3d at 576.

The court held that the association lacked associational
standing because member participation was required to prove the
underlying claims. Just as here, the associational plaintiff
claimed that the defendant, Sam's Club, was exerting pressure on
a third party not before the court, the manufacturers, in order to
get the third party to terminate a bilateral relationship with the
association's members, the manufacturers' representatives. The
court held that resolution of the tortious interference claims
required member participation because the defendant would need to
be able to obtain information regarding the business relationship
between the association's members and the third-party
manufacturers. Id. at 576-77.
13
all prior cases where the Court had found that associational

standing existed, plaintiffs had only sought injunctive relief.

517 U.S. 544, 554 (1996) ("Brown Group").

The logical fallacy inherent in Plaintiffs' argument is

evident on its face. The fact that all cases in which

associational standing has been found to exist involved a request

for injunctive relief, does not mean that associational standing

exists in all cases where an association seeks injunctive relief.

Indeed, such a rule is plainly precluded by the Court's

holding in Hunt, which requires the Court to look not only at the

type of relief requested but also at the nature of "the claim

asserted" to determine whether member participation is required,

a requirement repeatedly confirmed since Hunt was decided. Hunt,

433 U.S. at 343; see also Rent Stabilization Ass'n v. Dinkins, 5

F.3d 591, 596 (2d Cir. 1993) ("the relief sought is only half of

the story . . . we must also examine the claims asserted to determine

whether they require indi victual participation.") ; Friends for

American Free Enterprise, 284 F.3d at 577 (no associational

standing even though plaintiffs only sought injunctive relief);

Kansas Heal th Care Ass' n v. Kansas Dep' t of Social and Rehab.

Servs., 958 F. 2d 1018, 1022 (10th Cir. 1992) (no associational

standing even though plaintiffs only sought injunctive relief) .

14
 Thus, the mere fact that Plaintiffs seek injunctive rather

than monetary relief does not mean that member participation is

not required in this lawsuit.

c. This defect cannot be cured through sampling

Plaintiffs argue that this defect can be overcome by sampling

--i.e. by taking evidence from a representative sample of CFSA's

members without violating Hunt's third prong. Opp' n at 17

(arguing that "courts have repeatedly upheld associational

standing where, as here, 'an association plaintiff can prove its

case with a sampling of evidence from its members'" (quoting

Association of American Physicians & Surgeons, Inc. v. Texas

Medical Bd., 627 F.3d 547, 551-552 (5th Cir. 2010))).

Plaintiffs are correct that numerous courts have held that

the third prong of Hunt may be satisfied even though some minimal

degree of member participation is necessary. See e.g. Hospital

Council v. Pittsburg, 949 F;2d 83, 89 (3d Cir. 1991); Retired

Chicago Police Ass'n v. City of Chicago, 7 F.3d 584 (7th Cir.

19 93) ; see also Association of American Physicians & Surgeons,

Inc., 627 F.3d at 551-52 (providing an overview of various

Circuits' approaches to allowing sampling) . Those courts have

held that a representative sample of members could provide evidence

without violating Hunt's third prong. See Association of American

Physicians & Surgeons, Inc., 627 F.3d at 551-52.

15
 There does not appear to be any bright-line rule regarding at

what point sampling violates Hunt's third prong. See id. at 552

(differences in various Circuits' approaches "are more of degree

than kind"). Instead, it is a discretionary inquiry as to whether

it would be more efficient to allow sampling, rather than require

each member to bring a claim individually. See Alliance for Open

Society International v. U.S. Agency for International

Development, 651 F.3d 218, 229 (2d Cir. 2011). A number of factors

are relevant to this inquiry.

Typically, sampling is appropriate where only "minimal

participation from individual members" is required to prove the

claim. Id. (internal· quotation marks and citations omitted).

Thus, sampling is appropriate in a case where a "discrete pattern

of conduct . [is] alleged to have applied equally against a

large number of association members," such that "once proved as to

some, the violations would be proved as to all." Id.

A related factor is whether the claims present "pure questions

of law" or, instead, are "fact-specific." See Friends for American

Free Enterprise Ass'n, 284 F.3d at 577. Thus, Courts have

repeatedly held that the third prong of Hunt is not violated where

the claim involves a question of law. 7 Id.; Playboy Enterprises,

7 Another parallel is the difference between facial and as-applied
challenges. Facial challenges do not ordinarily require
individual member participation but as-applied challenges
16
Inc. v. Public Service Com'n of Puerto Rico, 906 F.2d 25, 35 (1st

Cir. 1990) (member participation is not required where the case

involves a "question of law which is not particular to each member

of the Association"); Bano v. Union Carbide Corp., 361 F.3d 696,

714 (2d Cir. 2004) (member participation is not required where

"organization seeks a purely legal ruling") ; but see Retired

Chicago Police Ass'n v. Chicago, 7 F.3d 584, 601 (third prong of

Hunt satisfied even though claims "were not premised on pure

questions of law") . In contrast, Courts have concluded that member

participation is required - and thus the third prong of Hunt is

violated - where a fact-specific inquiry is necessary to establish

a violation. Friends for American Free Enterprise Ass' n, 284

F.3d at 577.

Finally, courts have concluded that sampling does not violate

Hunt's prohibition on member participation where the sample

evidence focuses on the conduct of the defendant to establish a

ordinarily do. See Kansas Health Care Ass' n, 958 F. 2d at 1022
(individual participation not required where violation can be
adduced solely by looking at terms of agency policy or practice
(discussing AMISUB (PSL), Inc. v. Colorado Dep't of Social Servs.,
879 F.2d 789 (10th Cir. 1989)) but individual participation is
required where violation cannot be determined from reviewing
policies "on their face"); Bano v. Union Carbide Corp, 361 F. 3d
696, 714 (2d Cir. 2004) (member participation required in "as-
applied" challenge (discussing Rent Stabilization Ass'n, 5 F.3d at
596)); Free Speech Coalition, Inc. v. Attorney General, 787 F.3d
142, 153-54 (3d Cir.) (as-applied challenge under First Amendment
requires member participation to establish violation), rev'd on
other grounds by 825 F.3d 149 (3d Cir. 2016).
17
violation of law, rather than on the extent of plaintiff's

injuries. Pennsylvania Psychiatric Soc. v. Green Spring Health

Services, Inc., 280 F.3d 278, 286 (3d Cir 2002) (limited member

participation does not defeat standing where sample evidence 'is

about "methods" employed by Defendants and used to prove "systemic"

conduct by Defendants); Alliance for Open Society, 651 F.3d at 229

(finding associational standing where "it is the conduct of

Defendants . . that will be the primary subject of inquiry") ;

Retired Chicago Policy Ass'n v. Chicago, 7 F.3d 584, 602-03 (7th

Cir.) (limited member participation does not defeat associational

standing where sample evidence focuses on whether defendants

engaged in alleged conduct) .

Even Hospital Council of Western Pennsylvania v. Pittsburgh,

949 F.2d 83 (3d Cir. 1991), the case on which Plaintiffs rely so

heavily, is understood to allow for limited member participation

where the sample evidence was used to prove the conduct of the

defendant. See Retired Chicago Policy Ass'n, 7 F.3d at 603 ("In

that case, at issue was whether the defendant governmental entities

had pursued the policy of which the plaintiffs complained; the

court believed that issue could be answered through the evidence

submitted by, among others, some of the parties.").

The Court concludes that sampling is inappropriate in this

case, as all of the relevant factors suggest that no efficiencies

18
will be gained by allowing CFSA to litigate this matter, rather

than having individual members litigate their own claims.

Fir$t, Plaintiffs' stigma-plus claims do not involve pure

questions of law, but instead, are highly fact-sensitive. Whether

any individual member has suffered a loss of banking relationships

and whether that loss was caused by Operation Choke Point turns on

unique facts that are specific to that member, such as what reasons

the individual bank gives for terminating the relationship.

Second, this is not a case where sample evidence can be

limited to the conduct of the Defendants. As the Court has already

explained, the Defendants' conduct is only one of the elements in

establishing a due process violation under the stigma-plus test.

Indeed, CFSA's own pleadings confirm that individual

participation is required in this case. See SAC ~ 14 ("numerous

CFSA members have lost their business relationships with banks"

(emphasis added)). By stating that not all of its members have

lost banking relationship CFSA has clearly demonstrated that

Operation Choke Point did not have a uniform ef feet on CFSA' s

members. Therefore, this is not a case where sample evidence can

establish violations that "once proved as to some [members]

would be proved as to all." See Association of American Physicians

& Surgeons, Inc., 627 F.3d at 552.

19
 Finally, the Court believes that sampling is likely to be

inappropriate where an organization's membership is as small as

CFSA's. Where an organization contains only 41 members, as CFSA

does, a statistically significant sample size includes virtually

all members. Indeed, any smaller sub-sample of members raises the

risk of choosing an unrepresentative sample, either through

inadvertence or cherry-picking by the plaintiff. Thus, a sample

of sufficient size to be representative will not be significantly

more efficient than bringing the case individually, and any smaller

sample is likely to be unrepresentative and misleading.

Consequently, all of the relevant factors suggest that it

will be no more efficient to have CFSA litigate this case than to

have members pursue their claims individually. Association of

American Physicians & Surgeons, Inc., 627 F.3d at 552-53 (third

prong of Hunt is concerned with "whether an association or its

individual members are better positioned to present a case" and

judicial efficiency) . Therefore, as CFSA' s claims so clearly

"require[] the participation of individual members in the

lawsuit," the Court concludes that CFSA lacks associational

standing. See Hunt, 432 U.S. at 343.

iii. CFSA Lacks Organizational Standing
Additionally, rather than suing on behalf of its members, an

organization may sue on its own behalf to protect against alleged

20
violations of its own interests. Nat'l Treasury Employees Union

v. United States, 101 F.3d 1423, 1427-28. (D.C. Cir. 1996) (citing

Havens Realty Corp. v. Coleman, 455 U.S. 363, 378, (1982)). To do

so, the organization must satisfy each of the traditional three

prongs of the standing inquiry - injury in fact, causation, and

redressability. Id. at 1427. However, the alleged injury cannot

simply be an injury to its members' interests. Instead, it must

be a "concrete and demonstrable injury to [the organization's]

activities." Id.

CFSA alleges two distinct injuries which it argues satisfy

the first prong of injury in fact. First, CFSA alleges that it is

receiving fewer dues payments from members as a result of Operation

Choke Point. Opp'n at 28, n.8. Second, CFSA alleges that, as a

result of Operation Choke Point, it has had to divert significant

resources from its traditional activities to assist members who

have been adversely affected. Opp'n at 27.

a. CFSA's allegations that it has lost membership
dues are too speculative to establish causation
or redressability

The parties dispute whether Plaintiffs' loss of membership

dues, caused by the Defendants' actions, constitutes a cognizable

injury in fact. See Opp'n at 28; Mot. to Dismiss at 19-20. Each

21
party musters a number of cases seeking to show that it is correct. 8

Yet, neither cites to a decision of this Circuit's Court of Appeals

that conclusively resolves the issue.

Even if the Court were to assume that a loss of membership

dues was a cognizable injury in fact, it is evident that Plaintiffs

cannot show that this injury was caused by Operation Choke Point

or that an order from this Court would redress it.

"When a plaintiff's asserted injury arises from the

Government's regulation of a third party that is not before the

court, it becomes substantially more difficult to establish

standing. Because the necessary elements of causation and

redressability in such a case hinge on the independent choices of

the regulated third party, it becomes the burden of the plaintiff

to adduce facts showing that those choices have been or will be

made in such manner as to produce causation and permit

8
Opp'n at 28 n.8 (citing Taxation with Representation of
Washington v.Regan, 676 F.2d 715, 722-23 (D.C. Cir. 1982), rev'd
on other grounds, 461 U.S. 540 (1983); Construction Indus. Ass'n
of Sonoma Cnty. v. City of Petaluma, 522 F.2d 897, 903 (9th Cir.
1975); National Treasury Emps. Union v. IRS, 2006 WL 416161, at *2
(D.D.C. Feb. 22,_2006); NAACP v. Acusport Corp., 210 F.R.D. 446,
457 (E.D.N.Y. 2002); Tiano v. County of Santa Clara, 1994 WL
618467, at *6 (N.D. Cal. Oct. 19, 1994) Richards v. New York State
Dep't of Corr. Servs., 572 F. Supp. 1168, 1179 (S.D.N.Y. 1983));
Mot. to Dismiss at 19 (asserting that loss of dues is a
"derivative" harm and therefore non-cognizable as an Article III
injury (citing Petro-Chem Processing, Inc. v. EPA, 866 F.2d 433,
435 n.2 (D.C. Cir. 1989); Bensman v. United States Forest Serv.,
408 F.3d 945, 948 n.2 (7th Cir. 2005); Delta Air Lines, Inc. v.
Export-Import Bank, 85 F. Supp. 3d 250, 262 (D.D.C. 2015)).
22
redressability of injury. In other words, mere unadorned

speculation as to the existence of a relationship between the

challenged government action and the third-party conduct will not

suffice to invoke the federal judicial power." National Wrestling

Coaches Assn' v. Dept. of Education, 366 F.3d 930, 938 (D.C. Cir.

2004); see also Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138,

1150 (2013) (expressing a "reluctan[ce] to endorse standing

theories that require guesswork as to how independent

decisionmakers will exercise their judgment.").

Previously, this Court held in its Memorandum Opinion that

Plaintiffs' allegations were sufficient to establish standing.

CFSA, 132 F. Supp. 3d at 111-15. The Court held that Plaintiffs'

allegations established causation, by alleging that Defendants'

actions had caused third-party banks, who are not parties to this

litigation, to terminate their business relationships with CFSA's

members. Id. The Court also found that a decision in Plaintiffs'

favor could redress this injury by enabling Plaintiffs to once

again access the banking system, even if their original banks did

not restore the terminated banking relationships. Id.

Plaintiffs now ask that the Court go even further and find

that the increased costs CFSA's members suffered because of the

alleged loss of banking relationships in turn caused those members

to either withdraw from CFSA or to reduce their membership level

23
•.

within the association, resulting in lower dues. See Opp'n at 28-

29, n. 8. Plaintiffs' argument fails because they cannot show

either causation or redressability.

First, CFSA has failed to allege any facts tending to show a

causal relationship between Operation Choke Point and its

decreased membership revenue. CFSA names multiple members who

allegedly have lost banking relationships as a result of Operation

Choke Point, but fails to name a single member who has reduced its

dues payments as a result of such losses. See SAC. Similarly,

CFSA has submitted numerous declarations from members who allege

that they have lost banking relationships as a result of Operation

Choke Point, but not one alleges that Operation Choke Point caused

it to reduce its dues payments to CFSA. See various declarations

[Dkt. Nos. 23-1, 23-2, 23-3, 23-4, 23-5, 23-6, 23-8].

Indeed, it appears just as plausible that CFSA' s members,

faced with the allegedly existential threat of Operation Choke

Point, would maintain or increase their contributions to CFSA

because CFSA's very mission is to defend them from harmful

regulatory actions. Absent any tangible evidence, it is "mere

unadorned speculation" to inf er a causal link between Operation

Choke Point and the alleged reduction in members' dues payments.

See National Wrestling Coaches Ass'n, 366 F.3d at 838; Food and

Water Watch v. Vilsack, 808 F.3d 905, 913 (D.C .. Cir. 2015) (a court

24
need not "accept inferences that are unsupported by facts set out

in the complaint" (internal citations and quotation marks

omitted))

Unable to show that Operation Choke Point has caused a

reduction in membership dues, it is essentially impossible for

CFSA to establish redressability. Furthermore, even if CFSA could

establish causation, it is entirely unclear that a court order,

ending Operation Choke Point, would cause CFSA's members to return

to paying their previous level of dues. Indeed, just as with

Plaintiff's arguments regarding causation, the Court can imagine

an equally plausible scenario in which the Court orders a

termination of Operation Choke Point and CFSA's members decline to

resume their prior dues payments because the danger has passed. 9

9 This absence of causation and redressability distinguishes the
present case from many of those that Plaintiffs cite for the
proposition that a loss of membership dues constitutes an Article
III injury. See Opp'n at 28, n.8 (citing National Treasury
Employees Union v. IRS, 2006 WL 416161, *2 (D.D.C. Feb. 22, 2006)
("NTEU"); Construction Industry Ass'n of Sonoma v. Petaluma, 522
F.3d 897, 903-04 (9th Cir. 1975)).

For example, in NTEU the Plaintiff union challenged the
firing of union members and the court found standing on the
basis of a loss of union dues. 2006 WL 416161 at *2. The
court held that the loss was necessarily caused by the firing of
union members and was redressable because if the members were
reinstated they would be required to begin paying dues once
again. Id.

Similarly, in Petaluma the Plaintiff Construction association
challenged a regulation capping the number of dwellings that could
be built annually and the court found standing on the basis of a
25
 The Court is mindful of the Supreme Court's and the Circuit

Court of Appeals' repeated admonitions not to speculate as to how

third parties might respond to a court order in order to

manufacture standing. See Food and Water Watch, 808 F.3d at 931

("when considering any chain of allegations for standing purposes,

we may reject as overly speculative those links which are

predictions of future events (especially future actions to be taken

by third pa~ties)"); National Wrestling Coaches Ass'n, 366 F.3d at

838; Clapper, 133 S. Ct. at 1150. In this case, it is entirely

speculative as to whether the alleged reduced membership dues were

caused by Operation Choke Point or could be redressed by an order

of this Court. Therefore, CFSA cannot establish organizational

standing on the basis of that alleged injury.

b. CFSA' s alleged reprogramming of organizational
resources in response to Operation Choke Point
is not a cognizable Article III injury

CFSA also alleges that it has standing because Operation Choke

Point frustrates CFSA's mission and CFSA has had to expend

resources to combat that harm. Opp'n at 25-27 (citing National

loss of membership dues. Petaluma, 522 F.3d at 903-04. Because
membership dues were a fixed percentage of revenues, the cap on
building activity necessarily caused a reduction in dues and
lifting the cap would necessarily redress that harm. Id.
26
Treasury Emps. Union v. United States, 101 F.3d 1423, 1430 (D.C.

Cir. 1996)).

In assessing an organization's standing it is insufficient to

show that the organization's "mission has been compromised" by the

challenged action. Food and Water Watch, 808 F.3d at 919.

Instead, it must show the challenged action has "impeded" the

organization's own activities. Id. In other words, a showing of

injury requires "more than simply a setback to the organization's

abstract social interests." Nat'l Ass'n of Home Builders v. EPA,

667 F.3d 6, 11 (D.C. Cir. 2011).

This requires a "two-part inquiry-'we ask, first, whether the

agency's action or omission to act injured the organization's

interest and, second, whether the organization used its resources

to counteract that harm.'" Food and Water Watch, 808 F.3d at 919

(quoting PETA v. USDA, 797 F.3d 1087, 1093 (D.C. Cir. 2015)). "To

allege an injury to its interest, an organization must allege that

the defendant's conduct perceptibly impaired the organization's

ability to provide services in order to establish injury in fact.

An organization's ability to provide services has been perceptibly

impaired when the defendant's conduct causes an inhibition of the

organization's daily operations." Id. (internal quotations and

citations omitted) .

27
 "[A]n organization's use of resources for . . advocacy is

not sufficient to give rise to an Article III injury." See Food
i'

I & Water Watch, 808 F. 3d at 920. "Furthermore, an organization

does not suffer an injury in fact where it expends resources to

educate its members and others unless doing so subjects the

organization to operational costs beyond those normally expended."

Id. at 920 (internal citations and quotations omitted) .

The harms asserted by CFSA are not cognizable Article III

injuries. First, CFSA notes that its mission is to advocate on

behalf of payday lenders in the legislative and regulatory arena,

while Operation Choke Point is allegedly designed to put an end to

payday lending, the very activity CFSA advocates on behalf of.

Opp'n at 27. CFSA contends that if that is not a direct conflict

with its mission, then nothing ever would be. Id. While CFSA

tries to characterize this as a unique organizational harm, it is

nothing more than a "generalized grievance about the conduct of

the Government." Food and Water Watch, 808 F.3d at 926. Reduced

to its essence, CFSA believes that payday lending is good and,

necessarily, that this effort to allegedly eliminate payday

lending is bad. That is not an Article III injury. Id.

Additionally, CFSA alleges that it has been forced to divert

resources from its traditional lobbying activities and instead

spend its resources advising its members on how to respond to

28
Operation Choke Point and negotiating with the banks on behalf of

members. Id. Essentially, CFSA argues that it has been forced to

curtail its traditional issue advocacy and engage in a new type of

advocacy to respond to the threat posed by Operation Choke Point.

Yet, the Court of Appeals has repeatedly rejected the argument

that impairment of an organization's ability to engage in issue-

advocacy is a cognizable injury. See Center for Law and Educ. V.

Dep't of Educ., 396 F.3d 1152, 1161-62 (D.C. Cir. 2005) (impairment

of organization's ability to engage in "pure issue-advocacy" is

not cognizable injury for standing purposes) i National Taxpayers

Union, Inc. v. U.S., 68 F.3d 1428, 1433i PETA, 797 F.3d at 1093-

94. The courts have reasoned that an organization's interest in

lobbying on behalf of its members is ordinarily indistinguishable

from and identical to its abstract interest in having "a social

goal furthered." National Taxpayers Union, Inc. v. U.S., 68 F.3d

1428, 1433. Harms to such a generalized interest are

insufficiently concrete to rise to the level of a cognizable

Article III injury. 10 Id. i PETA, 797 F.3d at 1094.

10 Indeed,· in some instances, government actions that hinder the
policy objectives of an organization may help, rather than harm,
the organization as an institution, by energizing its members or
by giving it new opportunities to carry out its mission. See Elec.
Privacy Info. Ctr. v. Dep't of Educ., 48 F. Supp. 3d 1, 23 (D.D.C.
2014) ("Here, the Final Rule has not impeded EPIC's programmatic
concerns and activities, but fueled them. And the expenditures
that EPIC has made in response to the Final Rule have not kept it
from pursuing its true purpose as an organization but have
29
 Consequently, CFSA has failed to establish that it has

organizational standing.

iv. CFSA lacks Third Party (Jus Tetrii} Standing

Defendants argue that even if Plaintiffs can establish

organizational standing they still fail to satisfy the

requirements of third party standing, also known as jus tetrii

standing. CFSA asserts that it has satisfied the requirements for

third party standing.

The doctrine of third party standing is a prudential

limitation on the ability of third parties to challenge actions

that injure others who are not before the court. Lepelletier v.

FDIC, 164 F.3d 37, 43 (D.C. Cir. 1999). It reflects the principle

that, ordinarily, "a litigant must assert his or her own legal

rights and interests, and cannot rest a claim to relief on the

legal rights or interests of third parties." Powers v. Ohio, 499

U.S. 400, 410 (1991).

A party seeking to clear the prudential hurdle of third party

standing must first establish that it has Article III standing.

See Sands v. NLRB, 825 F.3d 778, 784 (D.C. Cir. 2016) ("[plaintiff]

contributed to its pursuit of its purpose.") ; Nat' 1 Consumers
League v. Gen. Mills, Inc., 680 F. Supp. 2d 132, 136 (D.D.C.2010)
("Challenging conduct like General Mills' alleged mislabeling is
the very purpose of consumer advocacy organizations. As such,
General Mills' alleged conduct does not hamper NCL' s advocacy
effort; if anything it gives NCL an opportunity to carry out its
mission.") .
30
•.

must show that he has standing under Article III, and that he

satisfies third party, or jus tertii, standing requirements. 11
) •

Assuming she has done so, there are three factors that must be

considered in "determining whether an individual may assert the

rights of others: (1) 'the litigant must have suffered an injury

in fact, thus giving him or her a sufficiently concrete interest

in the outcome of the issue in dispute, ' ( 2) 'the litigant must

have a close relation to the third party,' and (3) 'there must

exist some hindrance to the third party's ability to protect his

or her own interests. ' 11
Lepelletier, 164 F. 3d at 43 (quoting

Powers, 499 U.S. at 411) (emphasis added).

As the foregoing analysis makes clear, CFSA lacks Article III

standing, and therefore, it does CFSA no good to establish third

party standing. Furthermore, even if CFSA could establish Article

III standing, CFSA's alleged hindrance to its members is

insufficient to find that it has third party standing.

As the Court has already concluded, many if not all of CFSA's

members would be required to participate in this lawsuit and to

disclose information regarding their banking relationships. Thus,

CFSA's members will be forced to disclose their identities and

business practices in order to prove the claims in this lawsuit

and the claimed hindrance will exist regardless of whether. CFSA

litigates these claims on behalf of its members or whether the

31
members are forced to bring them individually. Indeed, one of

CFSA' s members, Advance America, is already a party to this

lawsuit, suggesting that this fear is not a hindrance to member

participation at all. See Hodak v. Peters, 535 F.3d 899, 905 (8th

Cir. 2008).

Additionally, CFSA fails to cite a single case holding that

fear of future regulatory activity alone constitutes a cognizable

hindrance. 11 As third-party standing is an exception to the rule

that litigants must bring their own claims, it is looked on with

disfavor, Kowalski v. Tesmer, 543 U.S. 125, 130 (2004), and the

Court will not extend this exception.

Thus, the Court concludes that CFSA cannot meet the test for

third party standing.

v. Therefore CFSA cannot establish standing under any
theory
In sum, the Court concludes that CFSA lacks either

associational standing or organizational standing. Furthermore,

the Court concludes that even if CFSA had organizational standing,

11 Plaintiffs rely on Members of the City Council of L.A. v.
Taxpayers for Vincent, 466 U.S. 789, 798 (1984). That case makes
clear that fear is a hindrance unique to the context of a facial
challenge under the First Amendment to a criminal statute. Id.

The other case on which Plaintiffs rely did not hold that
fear alone constitutes a hindrance. See Pennsylvania Psychiatric
Soc., Inc., 280 F.3d at 290 (concluding that fear "coupled with
[the third parties'] potential incapacity to pursue legal
remedies" constituted a hindrance) .
32
it cannot satisfy the prudential requirements of third party

standing, and therefore should not be allowed to litigate the due

process claims of its members. These conclusions rest on the

standard of review for a motion to dismiss, pursuant to Rule

12(b) (1), or a motion for judgment on the pleadings, pursuant to

Rule 12 (c).

B. Defendants Did not Waive their Standing Arguments

Finally, Plaintiffs argue that even if CFSA cannot satisfy

either the third prong of the Hunt test for associational standing

or the third prong of the test for third party standing, Defendants

waived these arguments by failing to raise them in their original

Motions to Dismiss. Opp'n at 9-11, 29. Plaintiffs argue that

these prongs are merely prudential limits on standing, and

therefore, that they do not survive the Supreme Court's decision

in Lexmark International, Inc. v Static Control Components, Inc.,

134 S. Ct. 1377 (2014). Opp'n at 9-11, 29.

In Lexmark the Court held that the "zone of interests" test

is not a standing requirement imposed by Article III and is

therefore non-jurisdictional. 134 S. Ct. at 1386-88. In doing

so, the Court suggested that the entire doctrine of prudential

standing may be illegitimate, noting that it "is in some tension

with . . the principle that a federal court's obligation to hear

and decide cases within its jurisdiction is virtually unflagging."

33
Id. at 1386 (quoting Sprint Communications, Inc. v. Jacobs, 134

S.Ct. 584, 591 (2013) (internal quotation marks omitted)); see

also 15 Moore's Federal Practice 3d § 101.50 (describing Lexmark

as "herald[ing] the demise of the prudential strand of standing").

Plaintiffs are correct that the tests for both associational

and third party standing contain prudential elements. See Brown

Group, 517 U.S. at 555 ("the associational standing test's third

prong is a prudential one"); Kowalski, 543 U.S. at 129-30

(describing third party standing doctrine as prudential and not

derived from limits of constitutional standing) . Plaintiffs argue

that in light of Lexmark, such prudential limits on standing are

no longer jurisdictional. Opp'n at 9-11, 29. Plaintiffs contend

that such non-jurisdictional arguments can be waived, and that

Defendants did in fact waive them in this case, by failing to raise

their associational standing and organizational standing arguments

in their first set of Motions to Dismiss. Id.

Plaintiffs are also correct that Lexmark casts doubt on the

vitality of prudential standing doctrines. See 15 Moore's Federal

Practice 3d § 101.50; Sheet Metal, Air, Rail, and Transportation

Workers Local Union 20 v. Van's Industrial Inc., 2015 WL 8180287

(N.D. In. December 7, 2015) (reviewing decisions in the Sixth,

Seventh, Eleventh Circuits, all stating that Lexmark has cast doubt

on the vitality of prudential standing) .

34
 However, just because a doctrine was labelled as a form of

prudential standing prior to Lexmark, does not mean that it is

necessarily non-jurisdictional after Lexmark. For example, in

Lexmark the Court held that while the prohibition on suits raising

"generalized grievances" had previously been treated as a form of

prudential standing, it is actually a form of constitutional

standing. Lexmark, 134 s. Ct. at 1387, n.3.

Most importantly, the Court in Lexmark expressly reserved the

question of whether third-party standing is a form of prudential

standing or is instead a form of constitutional standing.

see also United States v. TDC Management Corporation, Inc., 827

F.3d 1127, 1133 (D.C. Cir. 2016) (declining to decide whether,

after Lexmark, the limitations on third-party standing are

prudential) . And the Court of Appeals for the D. C. Circuit

continues to treat associational standing as jurisdictional after

Lexmark. 12 See Sierra Club v. FERC, 827 F.3d 69, 65 (D.C. Cir.

2016) . Thus, the fact that both associational and third party

· standing have been labelled prudential in the past, does not

establish what will happen in the future, post-Lexmark.

12 This alone would seem to foreclose Plaintiffs' argument with
regard to associational standing. However, in Sierra Club, it was
"unchallenged and clear" that plaintiffs had satisfied the third
prong of the Hunt associational standing test. Therefore, the
question of whether the third prong of Hunt is prudential was not
before the Court of Appeals. 827 F.3d at 65.
35
 Fortunately, the Court need not enter this thicket. Implicit

in Plaintiffs' contention that these def ens es are non-

jurisdictional and therefore waivable, is the assumption that

Defendants could have and should have raised them in their Motions

to Dismiss for Lack of Subject Matter Jurisdiction or, in the

Alternative, for Failure to State a Claim (emphasis added) .

However, Rule 12(h) (2) unambiguously provides that an

argument that is not raised in an initial Rule 12(b) (6) motion is

not waived prior to the conclusion of the case. See Fed. R. Civ.

P. 12(h) (2) (explaining that Rule 12(b) (6) arguments may be raised

as late as trial). Indeed, Rule 12(h) (2) expressly provides that

any defense that could be brought under Rule 12(b) (6) can later be

raised in a Rule 12 (c) motion for judgment on the pleadings.

Defendants' present motion is just that - a Motion to Dismiss for

Lack of Associational or Organizational Standing, or in the

Alternative, A Motion for Judgment on the Pleadings. [Dkt. No.

75] (emphasis added) .

Thus, Plaintiffs find themselves in a Catch-22 of their own

making. Either the absence of associational and third party

standing is jurisdictional, and therefore not waivable, or it is

non-jurisdictional and therefore preserved according to Rule

12 (h) (2). Either way, Plaintiffs' argument that Defendants have

waived their arguments regarding CFSA's lack of associational and

36
third party standing are without merit. See Washington Alliance

of Technology Works v. Dep't of Homeland Sec., 156 F. Supp. 3d

123, n.1 (D.D.C. 2015) (holding that, after Lexmark, failure to

raise in a motion to dismiss what was formerly considered a

prudential standing argument does not waive the issue, may be

decided on the merits at summary judgment), vacated as moot 650

Fed. Appx. 13 (D.C. Cir. 2016).

IV. Conclusion

For the foregoing reasons, Defendants Motion to Dismiss is

granted and Plaintiff CFSA is dismissed.

December 19, 2016
Gladys Kessler
United States District Judge

37